Preparing Baby Boomer Workers for Retirement

Seventy-one
percent of Baby Boomer workers have access to a 401(k) or similar plan offered
by their employers, including 78% who are working full-time and 42% part-time.

These
findings are corroborated by findings from the employer component of the 15th Annual
Transamerica Retirement Survey, which found 79% of employers offer a 401(k) or
similar plan to their employees but, among them, only 49% extend eligibility to
part-time workers.

Eighty-one
percent of Baby Boomer workers who are offered a 401(k) or similar plan
participate in that plan. Among those who are participating, the annual
percentage of their salaries saved is 10% (median).

Among
Baby Boomer workers who are currently participating in a plan, 23% have taken
some form of loan and/or early withdrawal from a 401(k) or similar plan, including
16% who have taken a loan and 9% who have taken an early withdrawal (e.g., took
a loan and didn’t repay it, cashed out
when changing jobs, hardship withdrawal).

Sixty-four
percent of Baby Boomer workers are saving for retirement outside of work. Among
those, savings accounts are the most frequently cited vehicle (66%), followed
by IRAs (51%), stocks (35%), primary residence (3%), mutual funds (33%), and
life insurance policies (31%). Fewer than one in five (18%) are investing in an
annuity.

Despite
some confidence-shaking events during the economic turbulence in recent years,
household retirement savings increased from 2007 to 2014. However, in many
instances, this growth in savings is still inadequate to fully fund an individual’s
or family’s retirement income needs. Baby Boomers have saved $127,000
(estimated median) in household retirement accounts compared to $75,000 in
2007.

Many Baby Boomer
workers (46%) expect their primary source of income in retirement to be self-funded
through retirement accounts or other savings and investments, including 34% who
expect to rely on 401(k), 403(b), or IRAs and 12% to rely on other savings and
investments. More than one-third (36%) expect to rely on Social Security as
their primary source of income when they retire. Just 12% expect to rely on
company-funded pension benefits.

The
survey identified six steps for retirement planning and saving in order to
improve Baby Boomers’ long-term financial outlook and achieve retirement
readiness:

1.
Take proactive steps to remain employed. Expectations of working past age 65
require that Baby Boomer workers remain employable. The survey asked Baby
Boomer workers what steps they are taking to help ensure they can continue
working. Most are staying healthy (65%), 54% are focused on performing well at
their current job, and 41% are keeping job skills up-to-date. However,
responses were much lower for networking (16%), scoping out the employment
market (14%), and going back to school (5%). A further analysis of these
responses found that 92% are taking at least one of the six proactive steps
identified; however, only 1% are pursuing all six steps.

2.
Calculate retirement savings and income needs. Baby Boomer workers estimate
that they need to save $800,000 (median) to feel financially secure in
retirement. Forty-seven percent believe that they need to save $1 million or
more. However, for many, the basis of their estimated retirement savings needs is
suspect: almost half (48%) guessed their retirement savings needs. Just 11%
have used a retirement calculator or completed a worksheet and only 5% say the
amount was given to them by a financial adviser.

3.
Develop a written strategy for retirement. One of the most important secrets to
retirement readiness is having a well-defined strategy. Only 14% of Baby Boomer
workers have a written plan. A strategy should consider a broad range of
factors including on-going living expenses, savings and income needs,
government benefits, health care costs, investment returns, inflation , tax
planning, long-term care, estate planning, and contingency plans for savings
shortfalls.

4.
Consider seeking guidance from a professional adviser. Planning for retirement
can be very complicated and related decisions carry profound financial consequences. Only 40% of
Baby Boomer workers who are saving and investing for retirement use a
professional financial adviser to help them manage their investments.

5.
Open up a frank dialogue with family. Only 9% of Baby Boomer workers frequently
discuss saving, investing and planning for retirement with family and friends.
Among Baby Boomer workers who are married, only 40% say they are “very
familiar” with their spouse’s savings. Now is the time to have candid
conversations to set expectations regarding plans, preparations, and potential
need to receive or provide financial support to any loved ones.

6.
Create a “Plan B.” Delaying retirement and/or continuing to work in retirement
is an effective way to continue generating income, bridge savings shortfalls,
and stay active and involved. However, for some this may not be possible when
the time comes. Only 26% of Baby Boomer workers have a backup plan for
retirement income if forced into retirement sooner than expected.

Harris
Poll conducted the 15th Annual Retirement Survey on behalf of Transamerica
Center for Retirement Studies. A telephone survey was conducted within the
United Stated by between July 31 and September 17, among a nationally
representative sample of 751 employers, including large (500 or more employees)
and small (10 to 499 employees) companies. An online survey was conducted
within the United States between February 21 and March 17, among a nationally
representative sample of 4,143 full-time and part-time workers, including 1,021
Millennials; 1,120 Generation X; 1,805 Baby Boomers; and 197 who were born
prior to 1946.